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Disability Retirement for An Employee on Paid Leave is Effective the Day After the Employee's Last Day of Paid Leave

Sara Astorga began working for the County of Santa Barbara on September 11, 1995. She stopped working on November 18, 2011, and applied for disability retirement the following month. Prior to her last day of work, Astorga took periods of leave for which she received State Disability Insurance (SDI) benefits. At the same time she was receiving SDI, Astorga also elected to receive a portion of sick leave donated by other employees, overtime, holiday and vacation balances such that her combined benefit would be equal to 80% of her regular pay.

On January 20, 2012, Astorga and the County signed a Separation Agreement confirming Astorga's election to remain on the County payroll until the effective date of her disability retirement. The Agreement also provided that Astorga would continue to receive leave balances in small but regular amounts corresponding to the amount of her health insurance premiums.

The Retirement Board of the County Employees Retirement System approved Astorga's retirement on November 20, 2013. The Board determined that the effective date of her disability retirement would be December 9, 2013, the day following the last day she received compensation in the form of sick leave, vacation or holiday pay. Astorga disputed the Board's determination of effective date and argued that the effective date of her retirement should be February 28, 2012, the date the compensation she received during the previous two years would have been paid out had it been paid in consecutive 80 hour pay periods.

Government Code section 31724 provides that the payment of disability retirement shall be effective as of the date the application is filed, but not earlier than the day following the last day for which the employee received regular compensation. The Court of Appeal considered two issues: (1) whether donated sick leave or vacation time from co-workers is "regular compensation" under section 31724 and (2) whether the incremental payments of sick leave, vacation and holiday pay should be "compressed" to achieve an earlier date of retirement.

The Court determined that the first issue was not properly before it as Astorga had failed to raise the issue before, either during the administrative proceeding or in the trial court. In addition, Astorga had stipulated that the donated leave was regular compensation pursuant to section 31724.

The Court did reach the second issue and relied upon the earlier decision in Katosh v. Sonoma County Employees' Retirement Assn. (2008) 163 Cal.App.4th 56.

The Court of Appeal held that Astorga knew or should have known the consequences of choosing to retain her health benefits in lieu of receiving retroactive disability retirement. The Court agreed with the trial court which had held that Astorga's decision to remain employed through December 8, 2013, was a wise decision because it allowed her additional donations of leave time from coworkers, allowed her the ability to obtain additional leave time and holiday pay that she would not otherwise have had, and allowed her to maintain her medical insurance. Since Astorga received regular compensation in the form of paid leave until December 8, 2013, under section 31724, her disability retirement was effective on the following day as the County Retirement Board had determined.

Note:

If an employee seeks to use increments of leave prior to beginning receipt of disability retirement payments, an employer should make clear that the effective date of the retirement will be the day after the last day the employee receives such payments. Employers do not have to count the leave payments as consecutive pay periods.

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